Financial Accounting-II (Mgt401)

Quiz 02
Spring semester 2008

Read following instructions carefully before attempting the quiz solution:

Quiz - 02 covers lesson no.23 to 25

Last date for submission of quiz is 1st July, 2008.
You can consult the concerned chapters from recommended books for attempting
quiz solution.
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Answer box:

Question # Option Question # Option

01 11
02 12
03 13
04 14
05 15
06 16
07 17
08 18
09 19
10 20

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 Financial Accounting-II (Mgt401)
Quiz 02
Spring semester 2008

1. Which of the following represents that the shares are issued at a price above the
face value?
a) Share issued at premium
b) Share issued at discount
c) Share issued at par value
d) Share issued at nominal value
2. Who provides the guarantee that if the shares are not sold in the market then
they will buy the shares itself?
a) Shareholders
b) Underwriters
c) Brokers
d) Agents
3. Which one of the following represents the allotment of shares to the existing
shareholders by capitalizing the reserves into additional capital?
a) Reserve funds
b) Accumulated profit
c) Bonus issue
d) Right issue
4. Which of the following will not be treated as a reduction in share capital but
will be written off as an expense as allowed by the companies ordinance 1984?
a) Premium on shares
b) Discount on shares
c) Nominal value of shares
d) Market value of shares
5. Which of the following is utilized by the company for the purpose of writing off
the preliminary expenses?
a) Discount on issue of shares
b) Premium on issue of shares
c) Issuance of shares at their face value
d) Issuance of shares other than cash
6. Which of the following are not issued by the companies according to the
Companies ordinance 1984?
a) Ordinary shares
b) Fractional shares
c) Bonus shares
d) Right shares
7. Which one of the following is used to increase the share capital of the company
without the adverse affect on the working capital if the company has the surplus
profit and reserves?
a) Cash dividend
b) Cash bonus
c) Pay of any share capital that is in excess of its needs
d) Bonus shares
 Financial Accounting-II (Mgt401)
Quiz 02
Spring semester 2008
8. ABC Co. Ltd. has a paid up capital of Rs. 800,000 divided into 8,000 shares of
Rs.100 each. Two bonus shares are issued for every four shares held in the
company. How many bonus shares will be issued by the company?
a) 2,000 bonus shares
b) 8,000 bonus shares
c) 16,000 bonus shares
d) 4,000 bonus shares
9. XYZ Company has paid up capital of 20,000 shares of Rs. 100 each. The
company offers to existing shareholders the right to buy 3 shares of Rs. 100 each
at Rs. 125 for every 5 shares held. How many right shares will be issued by the
company?
a) 10,000 shares
b) 15,000 shares
c) 25,000 shares
d) 12,000 shares
10. What will be the effect on earning per share in case of issuance of new right
shares?
a) Reverse effect
b) Major positive effect
c) Minor positive effect
d) No effect
11. If the company issues the bonus shares then what will be the effect on liquidity
position of the company?
a) No adverse effect
b) Adverse effect
c) Minor positive effect
d) Major positive effect
12. According to the section 95A of the Companies ordinance 1984, which of the
following statement is correct?
a) Creditors are entitled to object to repurchase fully
b) Creditors are not entitled to object to repurchase
c) Creditors are entitled to object to repurchase partially
d) Company is not required to maintain a capital repurchase reserve
13. Where purchase of share is made at a price lower than the nominal value of
shares, the difference shall be credited to which one of the following account?
a) Distributable Profit Account
b) Un-distributable Profit Account
c) Shareholders Account
d) Capital Re-purchase Reserve Account
14. When shares are repurchased at premium (Rs.100/-share purchased for Rs.110-)
then which of the following will be debited?
a) Cash account
b) Paid up Capital Account only
c) Share Premium Account only
d) Both Paid up Capital Account and Share Premium Account
 Financial Accounting-II (Mgt401)
Quiz 02
Spring semester 2008
15. According to the Companies ordinance 1984, the amount payable on application
of each share shall be the full nominal amount of the share. In view of this
which one of the following is correct?
a) Paid up Capital > Issued Capital
b) Paid up Capital < Issued Capital
c) Paid up Capital = Issued Capital
d) Paid up Capital ≥ Issued Capital
16. Which of the following will be paid 1st in regard of capital at winding up of the
company?
a) Ordinary Shareholders
b) Preference Shareholders
c) Deferred Shareholders
d) All types of shareholders
17. Which of the following is correct statement for prospectus of company?
a) It is the valuable document issued by the company for raising capital
b) It is the primary document of the company also known as the charter of the
company
c) It is the 2nd most important legal document of company to be filed with
the registrar
d) It is the 3rd most important legal document of company which is issued
before the incorporation of the company
18. Which of the following is required to file with SECP for raising capital when a
public limited company does not intend to approach the public?
a) Prospectus
b) Statement in lieu of prospectus
c) Articles of association
d) Memorandum of association
19. Which of the following refers to any notice, circular, advertisement, or any other
invitation to the public for subscription of any shares or debentures of a
company?
a) Prospectus
b) Statement in lieu of prospectus
c) Articles of association
d) Memorandum of association
20. According to the section 96 of the Companies ordinance 1984, which of the
following statement is correct?
a) Approval of court is not required for reduction in share capital
b) Creditors are entitled to object to repurchase partially
c) Company is required to maintain a capital repurchase reserve
d) No requirement by the company to maintain a capital repurchase reserve

(Total marks: 1 x 20 = 20)

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